The Gasoline Blues

[Joe G]

I've read an awful lot about the peak oil phenomenon, and what I've learned has convinced me that a continued cheap supply of oil is, as of 2006, no longer certain. To date, he world has not matched the production capacity of that year. This is due to actual on-the-ground causes (the crashing of several supergiant fields, political instability and violence, and countries keeping more of their decreasing production for their own populations and thus exporting less), and not simply greed. A report put out last year, subsequently buried, by the Dept of Energy confirmed as much. Combine those rather poor prospects with the whole mortgage crises (and they are related), and you're going to get some serious madness in the financial sector; like people doing everything they can to fuck the world to make a buck. Nothing new there, though.

[BeBop]

I DO NOT believe supply and demand is driving the prices up. I believe it is the "traders" much like the Enron crap. Did anyone watch the congressional hearings? 65% of the oil is bought by folks unable to take delivery!!!!!

"Fuck the world, make a buck" is the mantra.

Commodities futures markets - I assume that's what you're talking about - have never operated on the assumption that traders would take physical delivery. But yes, speculation can influence price. It's the same thing that causes 'bubbles' whether tulips* or natural gas.

* Perhaps the most famous of speculative bubbles in history.

[Chuck Nessa]

I DO NOT believe supply and demand is driving the prices up. I believe it is the "traders" much like the Enron crap. Did anyone watch the congressional hearings? 65% of the oil is bought by folks unable to take delivery!!!!!

"Fuck the world, make a buck" is the mantra.

Commodities futures markets - I assume that's what you're talking about - have never operated on the assumption that traders would take physical delivery. But yes, speculation can influence price. It's the same thing that causes 'bubbles' whether tulips* or natural gas.

* Perhaps the most famous of speculative bubbles in history.

Correct!

[Tim McG]

I DO NOT believe supply and demand is driving the prices up. I believe it is the "traders" much like the Enron crap. Did anyone watch the congressional hearings? 65% of the oil is bought by folks unable to take delivery!!!!!

"Fuck the world, make a buck" is the mantra.

Indeed.

But the bottom line is greed.

No more, no less.

[Tim McG]

I DO NOT believe supply and demand is driving the prices up. I believe it is the "traders" much like the Enron crap. Did anyone watch the congressional hearings? 65% of the oil is bought by folks unable to take delivery!!!!!

"Fuck the world, make a buck" is the mantra.

Commodities futures markets - I assume that's what you're talking about - have never operated on the assumption that traders would take physical delivery. But yes, speculation can influence price. It's the same thing that causes 'bubbles' whether tulips* or natural gas.

* Perhaps the most famous of speculative bubbles in history.

Correct!

Oh, c'mon.

The oil companies are taking full advantage and it has little to do with outside influences.

Why, then, can't they charge $2 bucks a gallon instead?

Answer: Because they know they can get away with unchallenged price gouging right now given today's market climate and a pinhead oilman for a president.

[Aggie87]

There's a whole lot of middle men that make a living on that gallon of gas you pump - from the convenience store clerk to the delivery truck driver to the distributors to the refineries, engineers, and so on. It's not *ALL* profit that goes into some huge faceless corporation's coffer.

That said, I think prices should be $2/gallon or under myself. It just ain't gonna happen when the cost of a barrel of oil coming into the country is so high.

[Tim McG]

There's a whole lot of middle men that make a living on that gallon of gas you pump - from the convenience store clerk to the delivery truck driver to the distributors to the refineries, engineers, and so on. It's not *ALL* profit that goes into some huge faceless corporation's coffer.

That said, I think prices should be $2/gallon or under myself. It just ain't gonna happen when the cost of a barrel of oil coming into the country is so high.

The problem is the cost per barrel simply does not translate to 20 and 50 cent price spikes at the pump. Secondly, how can the oil companies justify that price hike on oil already refined and in the underground tanks at the gas station? The hike in price should come after the higher priced oil has been refined then shipped out for consumption.

In effect, we are paying in advance for price increases not yet realized by the refineries.

As to profit, that $18 Billion dollar figure is based upon free and clear profit, Aggie. That means money left over after everybody has been paid off and services have been rendered. The oil companies are making themselves and their stockholders multi-millionaires while we all suffer for it.

That is just plain greed. Make no mistake.

Edited July 1, 2008 by GoodSpeak

[Joe G]

So NONE of the issues I posted above are real to you? And you have no regrets about the way of life in this country that has resulted from a century of cheap oil - one that is in danger of collapse if the price of gas rises a couple of bucks?

[The Magnificent Goldberg]

So NONE of the issues I posted above are real to you? And you have no regrets about the way of life in this country that has resulted from a century of cheap oil - one that is in danger of collapse if the price of gas rises a couple of bucks?

You can't have it both ways in one sentence, Joe. You can't say, "we have a crappy lifestyle" and regret its passing.

MG

[Joe G]

So NONE of the issues I posted above are real to you? And you have no regrets about the way of life in this country that has resulted from a century of cheap oil - one that is in danger of collapse if the price of gas rises a couple of bucks?

You can't have it both ways in one sentence, Joe. You can't say, "we have a crappy lifestyle" and regret its passing.

MG

That's not what I meant. The regret would be for the fact that we've allowed it to be set up in such a way that it is so vunerable to price fluctuations.

[The Magnificent Goldberg]

So NONE of the issues I posted above are real to you? And you have no regrets about the way of life in this country that has resulted from a century of cheap oil - one that is in danger of collapse if the price of gas rises a couple of bucks?

You can't have it both ways in one sentence, Joe. You can't say, "we have a crappy lifestyle" and regret its passing.

MG

That's not what I meant. The regret would be for the fact that we've allowed it to be set up in such a way that it is so vunerable to price fluctuations.

Ah. Thanks.

MG

[Tim McG]

So NONE of the issues I posted above are real to you? And you have no regrets about the way of life in this country that has resulted from a century of cheap oil - one that is in danger of collapse if the price of gas rises a couple of bucks?

They are all real to me, Joe.

The only regret I have is that we don't have a government with the huevos to stand up to the oil greedheads and to encourage non-oil money funded alternative/renewable energy sources.

There should be far more hydrogen/electric/alcohol/solar fueled vehicles on the road then we have now. I say cut the oil bastards off at the knees and take away their tax subsidies then solely and wholly promote non-oil dependent technologies with the vigor it deserves. That's how we can be independent of foreign oil.

Edited July 1, 2008 by GoodSpeak

[Aggie87]

There's a whole lot of middle men that make a living on that gallon of gas you pump - from the convenience store clerk to the delivery truck driver to the distributors to the refineries, engineers, and so on. It's not *ALL* profit that goes into some huge faceless corporation's coffer.

That said, I think prices should be $2/gallon or under myself. It just ain't gonna happen when the cost of a barrel of oil coming into the country is so high.

The problem is the cost per barrel simply does not translate to 20 and 50 cent price spikes at the pump. Secondly, how can the oil companies justify that price hike on oil already refined and in the underground tanks at the gas station? The hike in price should come after the higher priced oil has been refined then shipped out for consumption.

In effect, we are paying in advance for price increases not yet realized by the refineries.

As to profit, that $18 Billion dollar figure is based upon free and clear profit, Aggie. That means money left over after everybody has been paid off and services have been rendered. The oil companies are making themselves and their stockholders multi-millionaires while we all suffer for it.

That is just plain greed. Make no mistake.

From the Dept of Energy (here):

If you look at this, the "refining costs/profits" portion of what you pay at the pump essentially hasn't changed. As a business, the Exxons and Shells aren't taking MORE percentage of profit than they were before the prices started going crazy. And I'm quite sure as a company dependant on making a return on investment, they're not going to be willing to cut their profits in half (and alienate all their shareholders and disrupt the stock market even further), just because somebody thinks they're greedy.

And if you don't think companies should be trying to make a return on investment, what would their purpose be in a capitalist society?

Edited July 1, 2008 by Aggie87

[The Magnificent Goldberg]

The only regret I have is that we don't have a government with the huevos to stand up to the oil greedheads and to encourage non-oil money funded alternative/renewable energy sources.

Actually, it doesn't matter WHERE the money comes from. Better to impose a "windfall tax", which our government did about ten years ago, and cop a few hundred billions to fund those developments than get the money from some other source, I say.

There should be far more hydrogen/electric/alcohol/solar fueled vehicles on the road then we have now. I say cut the oil bastards off at the knees and take away their tax subsidies then solely and wholly promote non-oil dependent technologies with the vigor it deserves. That's how we can be independent of foreign oil.

All alternative energy sources have their environmental downsides. I've never seen - but I can't say I follow this assiduously - any report that seriously compares the environmental and other costs of different methods of producing energy. But clearly, if this had been done, we'd know what development path to follow. Since we appear not to know this, I guess no one's done it. But it seems a pre-requisite. Not doing it before has landed us where we are.

MG

[A Lark Ascending]

A variation on 'let them eat cake':

http://www.cnn.com/2008/WORLD/europe/07/01/royal.wine/

[Tim McG]

There's a whole lot of middle men that make a living on that gallon of gas you pump - from the convenience store clerk to the delivery truck driver to the distributors to the refineries, engineers, and so on. It's not *ALL* profit that goes into some huge faceless corporation's coffer.

That said, I think prices should be $2/gallon or under myself. It just ain't gonna happen when the cost of a barrel of oil coming into the country is so high.

The problem is the cost per barrel simply does not translate to 20 and 50 cent price spikes at the pump. Secondly, how can the oil companies justify that price hike on oil already refined and in the underground tanks at the gas station? The hike in price should come after the higher priced oil has been refined then shipped out for consumption.

In effect, we are paying in advance for price increases not yet realized by the refineries.

As to profit, that $18 Billion dollar figure is based upon free and clear profit, Aggie. That means money left over after everybody has been paid off and services have been rendered. The oil companies are making themselves and their stockholders multi-millionaires while we all suffer for it.

That is just plain greed. Make no mistake.

From the Dept of Energy (here):

If you look at this, the "refining costs/profits" portion of what you pay at the pump essentially hasn't changed. As a business, the Exxons and Shells aren't taking MORE percentage of profit than they were before the prices started going crazy. And I'm quite sure as a company dependant on making a return on investment, they're not going to be willing to cut their profits in half (and alienate all their shareholders and disrupt the stock market even further), just because somebody thinks they're greedy.

And if you don't think companies should be trying to make a return on investment, what would their purpose be in a capitalist society?

So you believe it isn't a case of greed when the oil companies are clearing record profits? $18 Billion dollars every quarter isn't exorbitantly high to you?

The chart explains the process but it sure as hell does not explain the obscene profits, Aggie. $2.80 is a far cry from $4.50. And screw the stockholders. What do I care if a few filthy rich greedheads make less on their investments when your Average Joe trucker or market is getting pushing out of business? Besides, this is a government study from the very same government allowing big oil to get away with price gouging murder.

It is the same weak argument the insurance industry had about doing business in California. That whole we are going to sell and leave you without insurance because it costs too much to insure Californians, oh-boo-hoo-bullshit-hoo was crap. It was just a scare tactic. They're still here aren't they. My feeling is the same here with oil stocks. Let them sell, Aggie. That will spread the stocks around to more and more folks and there goes their monopoly on the oil market. Same argument, different industry.

In short, I've got three words for the oil companies and their investors: Wah, wah, wah.

Edited July 1, 2008 by GoodSpeak

[Aggie87]

I would think it's safe to assume the current price is broken down in a chart that's identical to those charts.

16-17% of the cost you pay at the pump is for refining costs and profits. If you assume half of that is profit, you get 8 to 8.5%.

8.5% of $4.00 is 34 cents.

What is a reasonable profit you should expect a company to make on a product? Is 8.5% a reasonable profit for a business? Does it compare to other businesses? I'm guessing it's not out of line with most businesses.

Your gripe is the cost at the pump (which is more the fault of speculators and/or maybe OPEC, driving the barrel cost up), or the 8.5% profit/return on investment that the big oil companies make?

edit - Keep in mind that $18 Billion figure you keep bandying about is divided among many companies, it's not one super-mega-corporation.

edit - Microsoft's net quarterly profit was $4.7 Billion, according to this article. So in terms of pure figures, it's probably higher than any of the individual oil companies you're talking about.

DAMN MICROSOFT!

Edited July 1, 2008 by Aggie87

[catesta]

There's a whole lot of middle men that make a living on that gallon of gas you pump - from the convenience store clerk to the delivery truck driver to the distributors to the refineries, engineers, and so on. It's not *ALL* profit that goes into some huge faceless corporation's coffer.

That said, I think prices should be $2/gallon or under myself. It just ain't gonna happen when the cost of a barrel of oil coming into the country is so high.

The problem is the cost per barrel simply does not translate to 20 and 50 cent price spikes at the pump. Secondly, how can the oil companies justify that price hike on oil already refined and in the underground tanks at the gas station? The hike in price should come after the higher priced oil has been refined then shipped out for consumption.

In effect, we are paying in advance for price increases not yet realized by the refineries.

As to profit, that $18 Billion dollar figure is based upon free and clear profit, Aggie. That means money left over after everybody has been paid off and services have been rendered. The oil companies are making themselves and their stockholders multi-millionaires while we all suffer for it.

That is just plain greed. Make no mistake.

From the Dept of Energy (here):

If you look at this, the "refining costs/profits" portion of what you pay at the pump essentially hasn't changed. As a business, the Exxons and Shells aren't taking MORE percentage of profit than they were before the prices started going crazy. And I'm quite sure as a company dependant on making a return on investment, they're not going to be willing to cut their profits in half (and alienate all their shareholders and disrupt the stock market even further), just because somebody thinks they're greedy.

And if you don't think companies should be trying to make a return on investment, what would their purpose be in a capitalist society?

So you believe it isn't a case of greed when the oil companies are clearing record profits? $18 Billion dollars every quarter isn't exorbitantly high to you?

The chart explains the process but it sure as hell does not explain the obscene profits, Aggie. $2.80 is a far cry from $4.50. And screw the stockholders. What do I care if a few filthy rich greedheads make less on their investments when your Average Joe trucker or market is getting pushing out of business? Besides, this is a government study from the very same government allowing big oil to get away with price gouging murder.

It is the same weak argument the insurance industry had about doing business in California. That whole we are going to sell and leave you without insurance because it costs too much to insure Californians, oh-boo-hoo-bullshit-hoo was crap. It was just a scare tactic. They're still here aren't they. My feeling is the same here with oil stocks. Let them sell, Aggie. That will spread the stocks around to more and more folks and there goes their monopoly on the oil market. Same argument, different industry.

In short, I've got three words for the oil companies and their investors: Wah, wah, wah.

What the hell are you talking about?

First off, there is no oil market monopoly. Unless your idea of a monopoly is hundreds of oil companies in the business of oil production and sales. Plenty of competition from not only private and public held companies, but also governments as well.

That my friend is no monopoly. If you had the cash, you could get into the business yourself, no? You most certainly can buy stock with no one being able to stop you from doing so.

Do you have a 401K? How about an IRA or any type of mutual fund? If the answer is yes, you may already be in the oil business.

[Tim McG]

There's a whole lot of middle men that make a living on that gallon of gas you pump - from the convenience store clerk to the delivery truck driver to the distributors to the refineries, engineers, and so on. It's not *ALL* profit that goes into some huge faceless corporation's coffer.

That said, I think prices should be $2/gallon or under myself. It just ain't gonna happen when the cost of a barrel of oil coming into the country is so high.

The problem is the cost per barrel simply does not translate to 20 and 50 cent price spikes at the pump. Secondly, how can the oil companies justify that price hike on oil already refined and in the underground tanks at the gas station? The hike in price should come after the higher priced oil has been refined then shipped out for consumption.

In effect, we are paying in advance for price increases not yet realized by the refineries.

As to profit, that $18 Billion dollar figure is based upon free and clear profit, Aggie. That means money left over after everybody has been paid off and services have been rendered. The oil companies are making themselves and their stockholders multi-millionaires while we all suffer for it.

That is just plain greed. Make no mistake.

From the Dept of Energy (here):

If you look at this, the "refining costs/profits" portion of what you pay at the pump essentially hasn't changed. As a business, the Exxons and Shells aren't taking MORE percentage of profit than they were before the prices started going crazy. And I'm quite sure as a company dependant on making a return on investment, they're not going to be willing to cut their profits in half (and alienate all their shareholders and disrupt the stock market even further), just because somebody thinks they're greedy.

And if you don't think companies should be trying to make a return on investment, what would their purpose be in a capitalist society?

So you believe it isn't a case of greed when the oil companies are clearing record profits? $18 Billion dollars every quarter isn't exorbitantly high to you?

The chart explains the process but it sure as hell does not explain the obscene profits, Aggie. $2.80 is a far cry from $4.50. And screw the stockholders. What do I care if a few filthy rich greedheads make less on their investments when your Average Joe trucker or market is getting pushing out of business? Besides, this is a government study from the very same government allowing big oil to get away with price gouging murder.

It is the same weak argument the insurance industry had about doing business in California. That whole we are going to sell and leave you without insurance because it costs too much to insure Californians, oh-boo-hoo-bullshit-hoo was crap. It was just a scare tactic. They're still here aren't they. My feeling is the same here with oil stocks. Let them sell, Aggie. That will spread the stocks around to more and more folks and there goes their monopoly on the oil market. Same argument, different industry.

In short, I've got three words for the oil companies and their investors: Wah, wah, wah.

What the hell are you talking about?

First off, there is no oil market monopoly. Unless your idea of a monopoly is hundreds of oil companies in the business of oil production and sales. Plenty of competition from not only private and public held companies, but also governments as well.

That my friend is no monopoly. If you had the cash, you could get into the business yourself, no? You most certainly can buy stock with no one being able to stop you from doing so.

Do you have a 401K? How about an IRA or any type of mutual fund? If the answer is yes, you may already be in the oil business.

I was refering to Aggie's coment about how investors would further spook the economy by selling off their oil stock.

I say let 'em.

[Tim McG]

I would think it's safe to assume the current price is broken down in a chart that's identical to those charts.

16-17% of the cost you pay at the pump is for refining costs and profits. If you assume half of that is profit, you get 8 to 8.5%.

8.5% of $4.00 is 34 cents.

What is a reasonable profit you should expect a company to make on a product? Is 8.5% a reasonable profit for a business? Does it compare to other businesses? I'm guessing it's not out of line with most businesses.

Your gripe is the cost at the pump (which is more the fault of speculators and/or maybe OPEC, driving the barrel cost up), or the 8.5% profit/return on investment that the big oil companies make?

edit - Keep in mind that $18 Billion figure you keep bandying about is divided among many companies, it's not one super-mega-corporation.

edit - Microsoft's net quarterly profit was $4.7 Billion, according to this article. So in terms of pure figures, it's probably higher than any of the individual oil companies you're talking about.

DAMN MICROSOFT!

That would be wrong, Aggie.

The $18 Billion refers to one oil company profit: Shell Oil, I believe.

Exxon cleared $11.7 Billion Source:Exxon Profits

BP $6.53 billion....and this was back in 2005. [source:Washington Post ] The profits have nearly tripled since then, Aggie.

I could go on...

Now how do you balance that with the rising cost of crude oil? It simply does not stand to reason.

And let us take a look at that figure. Even if it is shared among what, five Big Oil companies, that would still calculate out to obscene profits by anybody's standard....but you'd have to go back five years to see that. The so-called invisible hand of the marketplace is morally corrupt and ethically bankrupt. This isn't capitalism, it is out and out greed.

They can't justify it and neither can you, my friend.

And I'm not really sure how that compares organization with a philanthropic owner like Microsoft which, BTW, has no real competition in the software market.

Apples and oranges.

Edited July 1, 2008 by GoodSpeak

[Tim McG]

The only regret I have is that we don't have a government with the huevos to stand up to the oil greedheads and to encourage non-oil money funded alternative/renewable energy sources.

Actually, it doesn't matter WHERE the money comes from. Better to impose a "windfall tax", which our government did about ten years ago, and cop a few hundred billions to fund those developments than get the money from some other source, I say.

There should be far more hydrogen/electric/alcohol/solar fueled vehicles on the road then we have now. I say cut the oil bastards off at the knees and take away their tax subsidies then solely and wholly promote non-oil dependent technologies with the vigor it deserves. That's how we can be independent of foreign oil.

All alternative energy sources have their environmental downsides. I've never seen - but I can't say I follow this assiduously - any report that seriously compares the environmental and other costs of different methods of producing energy. But clearly, if this had been done, we'd know what development path to follow. Since we appear not to know this, I guess no one's done it. But it seems a pre-requisite. Not doing it before has landed us where we are.

MG

Good point....and you're right, MG.

All I'm saying is here in America we have a pretend president and former oilman turning a blind eye to oil company manipulation of the market and price gouging.

[Tim McG]

Here is yet another article, Aggie.

The oil companies are drowning in greed sponsored profits.

To wit:

"Since January of 2002, the price of crude has tripled, leaving oil producers awash in profits. During that period, the top 10 major public oil companies have sold some $1.5 trillion worth of crude, pocketing profits of more than $125 billion."

Source: Oil awash in record profits

That is $125 BILLION total free and clear profits, Aggie. That would be the figure you need to consider relative to shared profits amounts between the oil companies.

Edited July 1, 2008 by GoodSpeak

[Chas]

The oil companies are drowning in greed sponsored profits.

To wit:

"Since January of 2002, the price of crude has tripled, leaving oil producers awash in profits. During that period, the top 10 major public oil companies have sold some $1.5 trillion worth of crude, pocketing profits of more than $125 billion."

Source: Oil awash in record profits

You could have saved a lot of typing by just quoting Balzac's " Behind every great fortune there is a crime " . If you can't be cogent , you can at least be pithy

[Aggie87]

Goodspeak -

Is 8.5% profit a fair figure or unfair?

[Tim McG]

Goodspeak -

Is 8.5% profit a fair figure or unfair?

As compared to what?

You haven't responded to my previous posts, Aggie. In our previous discussions on this BBS that usually means you're purposely ignoring them to set up a strawman debate [relative to your 8.5% figure] or you don't want to acknowlege that you're wrong here.

Your point was my $18 Billion dollar figure was a shared profit among all oil companies. That was incorrect. It is more like $125 Billion dollars in shared profits.

My piont is that it makes absolutely no sense that with each increase in crude oil the oil companies have tripled their profits since 2000. Any reasonable thinking man would see that with each increase comes a fair and higher price passed onto the consumer to balance profit against payouts. That is simply not the case here. The oil profits have far outstripped the cost of doing business.

You need to be more specific about that 8.5% mark you're bandying about, er...that is, to quote a recently popularized phrase.

Edited July 2, 2008 by GoodSpeak